Update: Apparently, the Android 2.2 manual update does not work on Motorola Milestone phones. So, please try the following only on your Motorola Droid handsets.
Motorola Droid users have started receiving over the air updates of the new Android 2.2 OS to their mobile phones. But if you are somehow not been able to update using the OTA link or would prefer to manually update your Droid to Android 2.2, the following steps may help.
Please do note that this will not work if you have rooted your Droid.
1. Click here to download the update file to your computer.
2. Rename the file to UPDATE.ZIP (If the .zip extension is not present, then rename the file simply as UPDATE. The extension should be automatically taken care of)
3. Move the file to the root of your SDCard
4. Switch off your phone
5. Boot your phone into recovery mode by holding power button and X simultaneously
6. You will now see a triangle with an exclamation point displayed. At this point, release both the buttons
7. Press the Volume-Up button and Camera button simultaneously
8. Use your D-Pad to select the “apply update.zip” option. Press the gold button on the D-Pad to continue
9. The update file will now be run. Once this is done, use the D-Pad to reboot your Motorola Droid
10. The phone will now reboot with the new Android OS
The manual update process is complete. Enjoy Froyo on your Motorola Droid.